Suppose that (21.1) holds with (r) = 0.1(0.035 - r) and (r) = 2.3r. (a) What is


Suppose that (21.1) holds with μ(r) = 0.1(0.035 - r) and σ(r) = 2.3r.
(a) What is the expected value of rt given that rt-1 = 0.04?
(b) What is the variance of rt given that rt-1 = 0.02?
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